Discuss the questions the research PowerPoint Presentation

Discuss the questions the research - PowerPoint Presentation Example Inflation targeting argues that an approach may not be operational due to time that monetary policy affects inflation, and also difficulties in forecasting inflation. These problems are the reasons for policy making should target money and exchange rates as well as other variables that are more directly controlled (Kohn and Robert, 309). The rate of inflation is fundamental determinant for the discount rate that is used to calculate the investment present value (Bernanke and Mishkin, 143). Changes in the rate of inflation affect market valuation of stock. There are various ways to construct and forecast this inflation rate and also the rationale of the methodology. Consumer price index (CPI) relies on simple analysis but more technical in forecasting the inflation rate. The technical analysis mean that prediction using Consumer Price Index that has passed and is related to an inflation rate data than prediction using economic data e.g. trends of commodity prices and employment wages( Bernanke and Mishkin, 122). Inflation rate momentum for the forecast is more important than the reversion. This means that inflation rate does not undergo reversion on its trend quickly on long term and short time changes in Consumer Price Index which are indicative of future changes and not changes in Consumer Price Index on a distant past. Forecasting using CPI requires construction of various different forecasts of a year before the annual CPI inflation by use of variables and method. Variables are CPI inflation, measures of inflation and economic activity and also the inflation expectations. These may be obtained through survey. Our study involved constructing many different forecasts of one-year-ahead annual CPI inflation using a number of variables and methods and then comparing the accuracy of those forecasts. Variables included CPI inflation, core measures of inflation, measures of economic activity, and inflation expectations obtained from surveys. Empirical models